Prop firms: what they are and how they work.
A short guide, written by someone who works with prop firms every day. No promises: just how things are.
What a prop firm is
A prop firm is a company that lets you trade its capital. You pay for an evaluation, you show you can manage risk, and if you pass you get a funded account: profits are split, and the firm absorbs losses within the limits it gave you.
These firms have grown fast. With an ordinary broker you need large deposits and leverage is limited; with a prop firm you trade larger capital by paying for an evaluation.
The evaluation
Almost all of them work the same way: one or two phases in which you must reach a profit target without breaking the loss limits. Break a limit and the account closes, and the evaluation has to be taken again, and paid for again.
The rules differ from one firm to another. Read them before you pay: they are the real product you are buying.
The five rules that decide it
Maximum loss in a day. Maximum loss overall, counted from the starting balance or from the highest point reached. The profit target. The minimum number of trading days. The forbidden strategies.
The first two work separately: staying under the daily limit does not protect you from the overall loss, and the other way round. This is where most accounts are lost.
Payouts
On a funded account profits are split, often 80/20 or 90/10 in the trader’s favour, with a first payout after a minimum period. Every firm has its own schedule and conditions: read those before you pay too.
Why most people fail
Most people who try an evaluation lose it. Not always because the method is no good: often because the capital runs out before they can show it. One bad day, a forgotten limit, a position bigger than usual.
The difference is discipline about limits: deciding them beforehand, and not arguing with them while the market runs.
Tax, in one line
Trading with prop firms has a tax side, and the answers change with where you live and with your own situation. We give no advice here: talk to an accountant before your first payout.
Where OnlyCash comes in
OnlyCash is the desk for people who work with prop firms: every account is a card with its limits written beforehand, the cash that comes in and goes out, the record of what happened. All on your PC, next to your platform.
It does not pass the evaluation for you. It is there so you do not lose one to a slip.
The firm’s name, and the firm’s rules
When you open a card you write down which firm you are working with. It is there so you know whose each account is when you have more than one, and nothing more: what counts is the account, not the name you put on it.
The rules are not ours to write. They change with the account you bought and with the day you bought it, and an out-of-date rule written by us would be worse than no rule: you write the limits when you open the card, reading them from the contract you accepted.